Digital health funding holds steady for first time in a year

After declining for four straight quarters, digital health funding stayed steady at $3.4 billion in Q1, per a CBInsights report.

Why it matters: The sector funding defied the decline seen across the broader venture environment but remains at the lowest level in years.

Details: Mega-round funding ticked down to just $600 million in Q1, marking an 85% year-over-year decline from the first quarter of 2022.

• Mega rounds accounted for just 17% of digital health funding — the lowest since the second quarter of 2019.
• "Comparatively, this was 20 percentage points lower than the broader venture environment, which saw 37% of all funding go to mega-rounds in Q1'23," CBInsights says.
• The quarter saw three digital health companies raise med rounds: Monogram Health ($375 million), Carbon Health ($100 million) and Kindbody ($100 million).
• Kindbody’s deal led to the company becoming the first new digital health unicorn since the second quarter of 2022 (valued at $1.8 billion).

By the numbers: Deals ticked up 1% to 387 in Q1, from 383 in the fourth quarter of 2022.

• Care delivery and navigation tech companies saw 44% of all funding and 37% of all deals across digital health categories.
• Digital therapeutics and wellness tech saw the lowest average disclosed deal size at $4.3 million.
• Three categories saw at least three-quarters of deals go to early-stage companies: drug R&D tech (75% early-stage deal share), digital therapeutics & wellness tech (76%), and health insurance & RCM tech (81%).

What they're saying: "It's incredibly promising to see the growth in the care delivery and navigation sector, which leads in both number of deals and total funding in Q1," said David Vivero CEO at Amino Health.

• "Solutions that close these gaps and deliver positive outcomes at lower costs for consumers are increasingly attractive to investors as they look toward what will drive future success in the industry," he adds.

• Vivero says he'll be watching the health and wellness space closely.
• "Digital health programs that can prove they are high ROI investments by health plan sponsors, and not mere experiments, will fare well in an environment in which purchasers are having to justify their programs to their partners in the financial side of the organization," he adds.

The bottom line: As employers tire of cobbling together various point solutions and seek a full-suite approach, "any new point solutions selling directly to employers will struggle to gain attention from prospective customers," Vivero says.